Essay: Competitive forces of Pepsi

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Essay: Competitive forces of Pepsi

Sample Essay

Five competitive forces in industry also affect the growth prospect of any product/firm. These forces include rivalry, threat of new entrants, threat of substitute products, bargaining power of supplier and bargaining power of buyer.

For Pepsi the major competitor is Coca-Cola that occupies the largest share in soft drink industry. Other competitors having a small share include Cadbury Schweppes, Cott Corporation and National Beverage. (Deichert, Ellenbecker, Klehr, Pesarchick, & Ziegler, 2006).

More recently, Pepsi has lost its second position in the beverage industry which is now being occupied by the Diet Coke. The reported reason is that Pepsi has invested its advertising budget more on charitable purposes and the opportunity was immediately sought by Diet coke.  (Gibson, 2011). Moreover the choice of Coke by the Obama team in White house placed high stress on the profitability of Pepsi (Scherer, 2009). Thus competitive pressure placed by counterparts in industry plays a significant role in shaping the marketing strategies of a company.

Threat of new entrants is very insignificant in soft drink industry as the major share is occupied by large players and this factor poses several critical entry barriers for the new entrants. These barriers include difficulty to compete with existing strong brands, access to distribution channels, high capital investment. This industry also poses some very harsh exit barriers as well including loss due to heavy fixed cost, high advertisement expenditures and penalties due to withdrawal of contracts with distributors.

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